Tax Season Tips û 5 Ways to Avoid Overpaying Your Taxes

: Tax Season Tips û 5 Ways to Avoid Overpaying Your Taxes
Author: Tyler Martin, CPA
Copyright: 2004

Given the time of year, you would expect a Certified Public
Accountant to have stacks of tax return information. Well, I do
have stacks of tax returns and client information. As I dig
through the info I am noticing common with prior returns
of new clients. These errors are leading to missed deductions
and overpaid taxes. Yuck! Why overpay your taxes? Hopefully
this article will help you avoid making the same errors and
losing money.

1) If you own a home, I commonly see real estate taxes missed
completely or partially deducted. These taxes are deducted on
Schedule A (itemized deductions). If you refinanced, it is
especi! ally important to review the settlement description (also
known as a closing relation) to see if real estate taxes were
paid out of escrow.

TIP: In Santa Clara County and I am sure other counties too, you
can call the assessor to find out how much you paid in 2003.

2) If you refinanced your home in 2003 (and who
didn’t?), make sure you to the full deduct points from past refinances
(Note: there is a recent IRS position on this. If you refinance
with the same lender the points may not be fully deductible in
the year of the refinance.) The rules here can be complicated so
I highly recommend you go to www.google.com and do a search to
understand the complexities or use a professional that is
qualified.

3) Selecting the right filing rank. If you are matrimonial or
single with no dependents you can select your filing status
easily but if you have a brat or dependent you may make suitable for
head of household stat! us. This can be a real money so make
sure you inspect this ! status b efore filing your return.

4) Computing basis for stock or mutual funds correctly. I
routinely see new clients do this one violation of right. If you sell mutual
funds, make sure you include reinvested dividends to the basis.
By doing this correctly, you lower the gain or raise the loss on
the sale and possibly lower your taxes. On the same note, if you
sold stock options, the basis computation can be very tricky.
For non-qualified stock options, your employer should have
included the gain in your W-2. This would at rest get reported as
a stock transaction but there typically is a small loss if it is
a same day sale.

5) It is feasible you are eligible to contribute to a traditional
IRA or a Roth IRA. Frequently, clients are confused by these and
believe they are acquisition a removal when in fact they are not.
As with all tax code, there are numerous rules to these so make
sure you learn them or work with someone that can e! xplain at
a level that makes sense to you.

Well, that’s it. I hope you made it through the article and put
in the effort so you avoid making the same mistakes. Please fee
free to stop by my site for more information and tips
(www.4cpa.biz).

Resource Box:

Tyler Martin is a Certified Public Accountant in San Jose,
California. He provides tax and QuickBooks leadership to
individuals and avocation owners. For more information about
Tyler and his services go to: www.4cpa.biz.

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